The performance of the China report is flat, and the operating efficiency has been significantly improved. The net profit of returning to the mother in the first half of the year was about 51 million yuan, down 10.84% from the same period last year. Considering that the R & D expenditure during the reporting period was 19.25 million yuan (+ 139.68% compared with the same period last year) and the impairment loss was about 14.59 million yuan, the company's performance in the first half was basically the same as that in the same period last year. Among them, the price of VB2, the core variety of the company, decreased significantly in the first half of the year compared with the same period last year due to the dumping of DSM into China. Through the reform of the production side, the company reduced the production cost per unit product, significantly improved its operating efficiency, and successfully offset the impact of the decline in prices.
The change of chairman sends out the signal of acceleration of national reform. The performance promises of 2015-2017 profit conversion made by Hubei CCTV since joining the company in 2014 have been fulfilled. At this point, the chairman changes and two new candidates for directors have rich experience in capital operation. It shows that CIC has made an overall plan for the upgrading of the company's management and the next step of state-owned enterprise reform, and the specific capital operation planning for the reform of state-owned enterprises will be the focus of the new leadership.
Environmental inspectors drive supply-side reforms, and VB2 price increases bring high performance flexibility. The core variety of the company, VB2, has risen from 155yuan / kg in June to 237.5 yuan / kg, an increase of more than 50%. Under the most stringent environmental supervision in history, VB2 is highly concentrated, and the whole industry chain has sufficient motivation to raise prices. And the price of raw material corn began to decline from 1775 yuan / ton in July, considering that September and October is the harvest time of corn, corn prices are expected to continue to decline, VB2 gross profit margin is expected to further increase, even at current prices estimated VB2 annualized net profit can also reach about 150 million yuan.
Profit forecast and investment rating: as the world's largest VB2 manufacturer, the company has a strong pricing power for VB2 products. Taking into account the improvement of the supply-side structure after the tightening of environmental protection, the API business is expected to remain high. And the company, as the only listed company under Hubei Changtu, is expected to become a capital operation platform for CCTV to vigorously develop the pharmaceutical industry. We continue to be optimistic about the improvement of performance and operating efficiency brought about by the reform of state-owned enterprises in the future. The company is expected to return home net profit of 155 million yuan, 184 million yuan and 216 million yuan respectively from 2017 to 2019, and EPS is 0.62,0.73,0.86 yuan respectively. Corresponding to the current share price PE of 27, 23, 20 times, covering for the first time, give buy rating.
Risk tips: VB2 price increases are not as expected, environmental inspectors are not as strong as expected, the progress of the company's state-owned enterprise reform is not as expected, and the company's performance is uncertain.
